The Cape Girardeau banking market has been good for Commerce Bancshares Inc.

"Areas like Cape Girardeau, with its stable economy and diversified industries, provide good growth potential in our operations," David W. Kemper, president and chief executive officer of the St. Louis-based bank holding company.

Commerce Bancshares, with assets of more than $11.5 billion, is a registered bank holding company operating at 300 sites in Missouri, Illinois and Kansas.

Kemper discussed banking and the economy Tuesday during a luncheon at the Drury Lodge, with a group of area business representatives. The luncheon was hosted by Kemper and Cord Polen, Commerce Community Bank president at Cape Girardeau.

Also speaking at Thursday's luncheon was Gary Campbell, chief investment officer of Commerce's Investment Management Group. He discussed the economy, interest rates and stocks and financial investments offered by the bank.

"We're looking at one of the longest periods of expansion since World War II," said Campbell. "Right now, its the second longest expansion period, but we feel it will continue into the Year 2000, stretching it to the longest period of economic expansion."

What has come out of this era of expansion is good returns for investors in the stocks and bonds market, said Campbell. "In turn consumers are spending more money."

Campbell predicted that the Federal Reserve would leave interest rates alone Tuesday, but that higher rates could occur in the coming months.

The Federal Reserve, in its Tuesday session, did decide that inflation is not enough of a threat to justify an immediate increase in interest rates.

But, as Campbell predicted, Fed officials put financial markets on notice that higher rates are likely in coming months. The decision to leave rates unchanged had been expected, despite a worrisome 0.7 percent jump in consumer prices reported Friday, the biggest one-month increase in nine years.

Many economists blamed the April surge in prices on one-time factors that they said overstated inflation pressures. They noted that other indicators of inflation, including wage pressures, had shown no signs of trouble.

The Fed's next interest rate meeting is June 29-30.

Both Kemper and Campbell referred to Y2K, and agreed that the banking industry was making big strides in being prepared for Y2K.

Kemper said all Commerce banks should be in total Y2K appliance by June 30.

The largest Missouri-owned bank and the 45th largest in the nation -- among 9,000 banks -- Commerce Bancshares Inc. announced record earnings of $38.7 million during the first quarter of 1999.

That was an increase of 12 percent from the $34.5 million during the same period in 1997. Per-share earnings were 62 cents, up 11 percent from the 56 cents of last year. The return on assets for the quarter was 1.40 percent, and the return on equity was 15.2 percent. The company has total loans of $6.9 billion and total deposits of $9.3 billion.

Cape Girardeau and Jackson branches are under the Commerce Regional Group along with Poplar Bluff Commerce Banks.